Servicing

The mortgage insurance industry -- after receiving certain assurances from the nation's GSE regulator -- has signaled its support for a new Fannie Mae and Freddie Mac program to refinance certain high LTV loans without using MI coverage. The refinance program is designed to lower the interest rate on at-risk risk loans that the GSEs already own or guarantee. Federal Housing Finance Agency director James Lockhart assured the Mortgage Insurance Companies of America that the MI exemption is limited and mortgage insurance will continue to be required on notes with loan-to-value ratios above 80% that are sold to Fannie and Freddie, as required by their charters. "We commend director Lockhart for offering this important clarification of the President's housing recovery plan," said MICA president Kevin Schneider. An estimated 4 million to 5 million borrowers who cannot refi because of falling house prices and tighter loan and mortgage insurance standards could be helped by the GSE refinance program. The GSEs can waive private mortgage insurance in refinancing these high LTV loans unless the borrower already has PMI. In that case, they have to "use best efforts to get the mortgage insurance rolled over to the new mortgage," Mr. Lockhart said. "Thus, it would be beneficial to the success of this initiative for the mortgage insurers to work with both companies as they move toward implementation."

Wingspan Portfolio Advisors, which specializes in highly delinquent loans, has launched a new consumer division focused on helping borrowers whose loans are in default. Dubbed "Foreclosure Resolution," the division will reach out to borrowers who are having trouble making payments, have been denied a loan modification, are considering bankruptcy, or who have ARMs balloon payments coming due.

Genworth Financial Inc., Richmond, Va., has been downgraded by A.M. Best Inc., Oldwick, N.J., which cited concern over exposure to mortgages on the company's balance sheet -- both at its life insurance side (as an originator and investor in commercial mortgages and securities, as well as residential mortgage-backed securities) and on the mortgage insurance side. While Best said Genworth had prudent commercial mortgage loan underwriting practices and limited delinquencies so far, the rating agency added it expected "rising defaults in response to the deepening recession, and is most cautious on the retail, hotel and office properties within close proximity to distressed housing markets and/or labor markets where unemployment is high." Best cut the financial strength rating on Genworth Financial from A+(Superior) to A(Excellent). The Best move came days after Fitch Ratings, Chicago, cuts its Insurer Financial Strength rating on Genworth Financial two notches, from A+ down to A-.

Fiserv Inc. said it has enhanced its loan servicing platform product so that it can now manage indirect and other third-party loans. The single-platform capability broadens the spectrum of loans to be processed and provides online, real-time back-office transactions for diverse portfolios, Fiserv said at the MBA Servicing Conference in Tampa, Fla. The Fiserv 'Loan Servicing Platform' is designed to manage all current types of indirect financing, including same-as-cash and staged funding loans that manufacturers, distributors and retailers may offer to borrowers.

In response to the need for mass loan modifications, Lender Processing Services has created RediMod, an application designed to streamline the loan modification process. LPS indicated at the MBA Servicing Conference in Tampa, Fla., that this new tool addresses processing and fulfillment needs for loan modifications by automating loan eligibility and best-fit determinations. The application is modular to enable those servicers with partial workout processes to merely fill in the gaps if there isn't a need for a new end-to-end process automation approach. RediMod includes data and analytics models that assign each loan in a portfolio a default propensity and loss severity score. It also has a rules engine that identifies borrowers currently in default and those at risk of defaulting in the future.

Three of the nation's top four residential servicing companies -- which together control almost half of all U.S. home loans -- saw their share prices fall to new 52-week lows on Friday. The three are: Bank of America, Wells Fargo & Co., and Citigroup, which rank first, second and fourth, respectively, among residential servicing firms with a combined market share of 47.75% ($4.65 trillion in loans), according to the Quarterly Data Report. The nation's third largest servicer, JPMorgan Chase, saw its share price fall to $19.03, a dollar and change above its yearly low. At press time the share price of BoA had fallen more than 14% on the day to $3.37, while Citigroup slid about 20% to $2.01. Citigroup briefly fell below the $2 mark. The decline was stoked, in part, by concerns from analysts that Citigroup and BoA could be nationalized.

Sy Naqvi, who ran PNC Mortgage for 11 years until it was sold to Washington Mutual earlier this decade, has returned to the bank-owned lender. According to an official familiar with the matter Mr. Naqvi's chief job will be to evaluate all the mortgage operations of PNC Bank and National City Mortgage, which the bank inherited when it bought National City Corp. of Cleveland at year end. (For the full story see the Monday edition of National Mortgage News.)

The Obama administration's plan to modify 3 million nonprime loans will be a boon for Federal Housing Administration lenders, according to the chief executive of Lenders One, an alliance of 135 mortgage bankers. "FHA will end up with a huge market share of these modified loans," CEO Scott Stern said in an interview with National Mortgage News this week. Several Wall Street firms are using Lenders One to refinance loans that have already been written down in value. Because of the credit scores and loan-to-value ratios, "the refinancing option of choice is FHA," Mr. Stern said. "Servicers like it because you are replacing risky loans with safe FHA loans."

A troubled homeowner should be given every chance to modify his mortgage before filing for bankruptcy, according to the nation's GSE regulator who is concerned that changes in the bankruptcy code could actually hurt families and their bankers. Homeowners should not have to go through the "hardship and rigors" of bankruptcy to get their monthly payments reduced to an affordable level, said Federal Housing Finance Agency director James Lockhart. The Obama administration has outlined a $75 billion program to modify and refinance problem mortgages. But the administration also is supporting changes to the bankruptcy code that would allow judges to reduce or 'cram down' the principal amount of the mortgage. Although Obama's bankruptcy cramdown proposal is much more conservative than the bankruptcy bill recently passed by the House Judiciary Committee, Mr. Lockhart is concerned Congress will "go too far" and pass legislation that could be harmful. Bankruptcy sounds like a "good" solution, he said, "but it hurts individuals. And it can really dramatically weaken the balance sheets of our weak financial institutions, so we must be careful." Once a homeowner is in bankruptcy, Mr. Lockhart wants him to get one more chance at a loan modification and avoid living under a five-year bankruptcy financial plan. The bankruptcy judge should tell the servicer what the court is prepared to do and give the servicer "one more shot at it," he said.

Mission Capital Advisors, LLC, a commercial, residential and consumer loan sale advisor with offices in New York, Florida and Texas, has hired Jason Cohen as a managing director in the firm's New York office. In his new role, Mr. Cohen will originate loan sales, trade loans and create loan sale financing platforms. For the past five years he was a managing director with the Ackman Ziff Real Estate Group, where his volume of deals completed exceeded $3 billion and he originated and placed senior debt, mezzanine debt, preferred equity, and equity for all types of real estate. "Jason joins us at a time when there is a significant amount of commercial and residential loan portfolios on the market, with an expected increase throughout 2009 and beyond," said David Tobin, principal at Mission Capital Advisors.